CBS This Morning

Alaska, lagging in oil production, looks to bring back boom

The U.S. is on its way to
becoming the world's top oil producer. The Energy Department believes American output will soar to 9.6 million barrels
a day by the year 2016. But surprisingly, Alaska, one of the country's top oil
suppliers, is being left in the dust.

Paul Hughes owns a
snowmobile shop near Anchorage. He says there's one day each year every Alaskan
looks forward to: the day the state announces the oil dividend. He said this
year it’s almost $900.

Every man woman and child
in Alaska gets a check, their share of the state’s vast oil revenues. Hughes
told CBS News’ Ben Tracy some people spend the money on snowmobiles and he used
one of his kids’ checks to buy a new stove.

However, those annual oil
checks are getting smaller because Alaska is producing less oil. Production on
the North Slope peaked at 2 million barrels per day in 1988 but has dropped to
less than 500,000 barrels currently. There's so little oil flowing through the 800-mile Trans-Alaskan Pipeline that some state leaders say it may freeze and
shutdown.

The problem isn't that they're
running out of oil in Alaska -- the oil industry says there's still billions of
barrels of oil in the North Slope alone. But they say the problem is
taxes."

Kara Moriarty represents Alaska’s
oil industry. She blames a 2007 oil tax imposed by the state that climbed as
high as 75 percent depending on the price of oil that caused the oil industry to slow
production in Alaska. Alaska
has now fallen behind Texas, North Dakota and California in oil production.

"If we don't change
things we're going to be out-surpassed by Oklahoma,” said Moriarty.

Alaska Gov. Sean Parnell
has now pushed through a new 35-percent flat tax on oil. He's hoping to lure
companies back to Alaska’s North Slope.

"When California
eclipsed us a producing state, that was embarrassing,” said Joe Balash, who
runs Alaska’s Department of Natural Resources. “They are the most over-regulated,
overtaxed place on the face of the planet - well in the United States."

Alaska is uniquely
dependent on oil. There is no income tax, property tax or sales tax. More than
90 percent of the state budget is paid for with oil taxes. The people in the
state also depend on the revenue from oil.

Hughes knows what oil and
those oil checks mean to his business, even if they are getting smaller. He
told Tracy that he’d “like to see it higher.”

However, that won't happen
unless production on Alaska’s North Slope stops heading south.